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Trouble Ahead For Cloud Computing Stocks

Groupon, Facebook, and Zynga are currently having difficulties since their initial public offerings. Their losses can go as much as 70%. Currently, public cloud computing companies are not affected. This is primarily because companies like NetSuite and Salesforce.com have already proven themselves since they’ve been around since late 1990s. These companies have already proven that their customers are capable of buying their products and services. These customers also know that these companies offer cloud computing applications which are packed with benefits.

Social networking companies, on the other hand, are relatively new and they have not proven themselves. The social industry goes with the highly changing times and that it’s difficult to convert the customers’ support to money. This year, companies like Bazzarvoice, Brightcove, Demandware, and ExactTarget have gone public. These cloud computing companies’ share prices have not dipped below their IPO prices. However, this should not mean that the cloud computing industry can relax a bit because more and more cloud computing providers will surely go public. When these companies do, there are so many stocks available in the market.

Investors must also consider macro-economics. If the US economy doesn’t improve, the first one to be affected is software because customers will surely wait for the economy to improve before they make a purchase. The effect may not be very visible now because these cloud companies offer subscriptions to the public therefore revenues are not recognized instantaneously. However, if there are no new subscriptions in the succeeding months then one can expect revenue problems in the near future although the effects won’t be as devastating as the social stocks.

Comments

Great post. My friend was telling me about cloud computing and I didn't really know what she was talking about so I am doing research on cloud computing providers, that is how I came across this post. Thanks so much for explaining, I think I understand it now!

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